The
US Administration has announced a series of new sanctions intended to bring
about change in Cuba. The measures have been condemned by the European Union,
Canada and other nations which have said they will retaliate. Cuba has
suggested that the US is trying to “asphyxiate” it.

Although
every US President has suspended Title III of the 1996 Helms Burton legislation
which allows US citizens to take legal action against those who have trafficked
in (benefitted from) properties expropriated following the Cuban revolution, on
17 April the Trump Administration said that it would no longer do so. The
decision means that as of 2 May all US claimants may bring cases against those
deemed to have befitted from expropriated assets in Cuba. The decision unilaterally
abrogates two formal agreements reached with
the EU in 1997 and 1998.

The
measures form a part of the messaging for the Trump Administration’s 2020 re-election
campaign in South Florida but are likely to create a period of uncertainty in
relation to investment, trade and travel in Cuba, divide Washington and its
allies, and create significant problems for the Cuban economy.

Talks
on resolving the issue were briefly resurrected with Cuba during the second
term of the Obama Administration, but the Trump Administration has shown no
inclination to continue the dialogue. Cuba had previously compensated other
foreign nationals for assets seized following its revolution, however the
severing of diplomatic ties with the US in 1961 effectively stalled
compensation for US claims.

The new measures

The
Trump Administration’s announcement tightens the US embargo in a manner that
affects third countries, enabling lawsuits to be brought against anyone
including US companies deemed to be trafficking in confiscated property in
Cuba.

Helms Burton Titles
III and IV: Under
the previously waived Title III of the 1996 Helms Burton legislation any US
national whose property was seized by the Cuban government after 1959 can seek
damages in the US courts against anyone alleged to have ‘trafficked’ in such
assets. In a unique departure from the norms of sovereignty and contrary to
international law, the Title affords claimant rights to Cuban Americans who were
Cuban citizens at the time their property was confiscated.

Although
there are 5,913 certified claims of seized American property in Cuba, the
number of Cuban Americans who since became US citizens whose property was
seized could result in as many as 0.2m claims, although many could be too small
to qualify.

More
potent from an external investor’s perspective, Title IV of the legislation is
now to be pursued aggressively. Little
used to date, this directs the State Department to deny visas to any foreign
nationals who traffic in confiscated property or are corporate officers or
shareholders of involved entities.

In
addition, a series of other measures were announced aimed at weakening the
Cuban economy.

Remittances: Washington has imposed a cap on
Americans’ ability to send general/non-emigration remittances to Cuba so that
US nationals may now only send US$1,000 per quarter, per person to individuals
living in Cuba. The decision is expected to severely impact on the up to US$4bn
estimated to be sent annually in remittances largely from the US following the
previous lifting of all limits on remittances by President Obama.

The
measure is likely to affect many Cubans including cuentapropistas who depend on
remittances from relatives and friends in the United States at a time when
reduced US travel has already dealt a huge blow to Cuban private income flows.

U-turn financial
transactions: The Administration
announced it will end U-turn financial transactions in which one party is a
Cuban national or the Government of Cuba. U-turn transactions occur when
parties outside the United States transfer funds that pass through a US
financial institution before being redirected to the recipient of the transfer.

By
reinstating the measure, foreign banks undertaking such transactions will incur
substantial fines for processing any related transfers in US dollars, and
foreign entities will once again find funds which touch the US banking system
being seized and not returned. The new regulation is expected to further
complicate cross border business payments to and from Cuba and act as a
disincentive to investment.

Non-family travel: Washington intends restricting
non-family travel to Cuba but has yet to issue the details of what changes it will
make to its existing travel licensing regulations which presently allow travel
in one of twelve permitted forms.

Engage
Cuba, the US pro-Cuba business lobby, speculate that the Administration could
opt to ban most non-family travel to Cuba by ceasing OFAC approval for licenses
in most authorised categories, or it could require specific licenses for all
categories, which would involve OFAC approving each trip on a case-by-case
basis. Either interpretation would reverse the Obama’s era changes that allowed
US travellers to self-certify their purpose of travel without acquiring a
license.

It
remains unclear how the announced restriction on travel might affect existing
tour operators, airlines and cruise ship companies who are expected to make strenuous
representations to mitigate the impact on what had been the Caribbean’s fastest
growing travel market.

According
to Engage Cuba, particularly disruptive would be a specific license requirement
for group people-to-people travel – the authorisation used by US cruise
passengers – as it would diminish the present number of US travellers to Cuba
dramatically.

Cuba Restricted List: Beyond this the State Department
has also added five new entities to its Cuba Restricted List which prohibits US
nationals and companies from engaging in direct financial transactions with
such named bodies which Washington says have links to the Cuban military. Those
newly named are Aerogaviota, Santa
Isabel, El Caney Varadero and Meliá Marina Varadero Apartment hotels, and the
Diving Center-Marina Gaviota. The full list can be found at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/290163.htm

Europe and Canada respond

In
a joint statement the EU High Representative, Federica Mogherini, the EU trade
Commissioner Cecilia Malmström and the Canadian Foreign Minister, Chrystia
Freeland, reiterated their strong opposition to Washington’s unilateral
extraterritorial application of Cuba-related measures which they said were
contrary to international law.

Describing
the decision as ‘regrettable’ and as having ‘an important impact on legitimate
EU and Canadian economic operators in Cuba’, the joint statement said that the
EU and Canada were ‘determined to work together to protect the interests of our
companies in the context of the WTO and by banning the enforcement or
recognition of foreign judgements based on Title III, both in the EU and
Canada’.

‘Our
respective laws allow any US claims to be followed by counter-claims in
European and Canadian courts, so the US decision to allow suits against foreign
companies can only lead to an unnecessary spiral of legal actions’, the joint
statement said.

Noting
that the decision breached US commitments made in EU-US agreements in 1997 and
1998 ‘which have been respected by both sides without interruption since then’,
the EU additionally said that it would consider all options at its disposal to
protect its legitimate interests in relation to its WTO rights and through the
use of the EU Blocking Statute.

The
EU statute prohibits the enforcement of US courts judgements relating to Title
III of the Helms-Burton Act within the EU and allows EU companies sued in the
US to recover any damages through legal proceedings against US claimants before
EU courts.

It
does so by preventing any European Court from recognising the validity of US
court orders under the Helms Burton legislation making it impossible for assets
in Europe to be seized. In addition, EU clawback legislation authorises EU
economic interests to counter-sue in the EU courts any US corporation which has
been awarded a claim against an EU economic operator.

Consideration
is also understood to be given as to how to respond to the activation of Title
IV relating to visa denial.

In
an earlier letter to the US Secretary of State, Mogherini and Malmstrom had
said “We believe that the issue of outstanding US claims should not be
conflated with the cause of furthering democracy and human rights in Cuba, or
by our shared desire urgently to find a peaceful and democratic solution to the
crisis in Venezuela.”

US reaction

In
the US, the US Chamber of Commerce and pro-Cuba business groups including
Engage Cuba, released statements critical of the new measures. Among those in
Congress expressing concern about the potential damage to the Cuban people were
the Chair of the House Foreign Affairs Committee Eliot Engel (D- New jersey),
Kathy Castor (D-Florida), Jim McGovern (D-Massachusetts), Donna Shalala (D-Florida),
and Barbara Lee (D-California).

In
contrast Senator Marco Rubio (R-Florida), widely believed to be responsible for
the development of the new policy together with the US National Security
Adviser John Bolton, said in a Tweet that allowing US citizens to sue the Cuban
regime for confiscated property in Cuba “is the right thing to do”.

Cuba repudiates the new US policy

A
formal statement issued by the Cuban Government said that it rejected the new
US measures in the strongest terms possible noting that they had “the
fundamental goal of imposing colonial tutelage” on the country. It also
repudiated the decision to reinstate limits on remittances, further restrict
travel, and impose additional financial sanctions, describing US attempts to
justify it actions as lies and coercion, and intended to cover up the failure
of its policy in Venezuela.

The
statement said that US intelligence agencies had more than enough evidence to
know that Cuba has no troops in Venezuela, and that the 20,000 plus Cuban
collaborators there, of whom more than 60% are women, were contributing to the
provision of basic social services, and in particular healthcare.

Speaking on 25 April at a press conference, Cuba’s Foreign Minister reiterated that Cuba’s decree law 80 of 1996 had declared Helms-Burton illegal and unenforceable in Cuba. He also said that Cuba will continue to honour all its commitments in economic matters with its international partners. “I’m sure sanctions will have a probable economic impact,” Rodriguez said, but they are “destined to fail and result in the US’s international isolation in relation to the embargo”.

He also forcefully rejected a reference by the US National Security Adviser, John Bolton, to Cuba having “20,000 thugs” in Venezuela, describing him as a “pathological liar”.

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